This recent post highlighted the net $474.4 million Foreign Corrupt Practices Act enforcement action against Gunvor (a Swiss-based energy trading company – a subsidiary of Gunvor Group Ltd., a multinational energy commodities trading company registered in Cyprus).
In summary fashion, the DOJ alleged that between 2012 and 2020 Gunvor, through various managers, “knowingly and willfully conspired and agreed with others to corruptly offer and pay bribes to, and for the benefit of, Ecuadorian officials to secure improper advantages in order to obtain and retain business from Petroecuador in connection with the purchase and sale of oil products through contracts between Petroecuador” and state-owned energy trading companies based in Asia.
This post highlights additional issues to consider from the enforcement action.
Timeline
The Gunvor enforcement action was based on the same core conduct as the DOJ’s previous criminal enforcement action against Raymond Kohut (an individual who worked in business development for Gunvor). The Kohut enforcement action began – at the latest – in August 2020 when the DOJ filed this complaint.
From start to finish, Gunvor’s FCPA scrutiny appears to have lasted at least 3.5 years.
I’ve said it many times, and will continue saying it until the cows come home: if the DOJ/SEC want their FCPA enforcement programs to be viewed as more credible and more effective the enforcement agencies must resolve instances of FCPA scrutiny much quicker.
This is particularly true in the Gunvor matter given the following language from the DOJ regarding the company’s cooperation:
“(i) producing documents to the Offices from multiple foreign countries expeditiously while navigating foreign data privacy and criminal laws; (ii) providing information obtained through its own internal investigation to the government, which allowed the government to preserve and obtain evidence as part of the government’s investigation; (iii) making detailed, factual presentations to the Offices; (iv) arranging for the interview of an employee based outside the United States; (v) promptly collecting, analyzing, and organizing voluminous information, including complex financial information, at the request of the Offices, and producing an analysis of trading activity conducted by multiple outside forensic accounting firms retained by the Defendant; (vi) translating foreign language documents to facilitate and expedite review by the Offices; and (vii) imaging the phones of relevant custodians at the beginning of the Defendant’s internal investigation, thus preserving business communications sent on mobile messaging applications;”
Origins of the Bribery Schemes
The Gunvor enforcement action involved – not only PetroEcuador – but other state-owned entities in Asia.
How so?
Under the heading “Origins of the Schemes” the DOJ states:
“In or by 2011, Gunvor and its co-conspirators learned that Petroecuador had developed a program of oil-backed loans, through which state-owned entities provided loans to Petroecuador secured by oil products to be delivered over a period of years. Since the counterparties to these contracts were foreign governments, Petroecuador did not require a competitive bidding process to award the contracts. In turn, private trading companies entered into separate but related agreements with the state-owned entities to market, sell and transport the oil products delivered pursuant to the state-owned entities’ contracts with Petroecuador. As such, private trading companies effectively assumed the position of the state-owned entities in the contracts with Petroecuador.
[…]
By partnering with a state-owned entity, Gunvor could benefit from the state-owned entity’s relationship with Petroecuador. Gunvor would enter into separate but related agreements with the state-owned entity to pre-finance, market, transport and sell the oil products delivered pursuant to the state-owned entity’s contract with Petroecuador. This would allow Gunvor to obtain oil products through a streamlined process that was otherwise not available to private entities like the Company.”
Confidential Information
As highlighted in this prior post, in several FCPA enforcement actions, the end result of things of value being offered or provided to alleged “foreign officials” is the company gaining access to confidential documents.
The Gunvor enforcement action was the most recent example. As alleged by the DOJ, in exchange for “bribes” to alleged Ecuadorian officials, Gunvor received “confidential loading and shipping window information” which “allowed Gunvor to further its corrupt scheme by planning, in a financially efficient way, its marketing of oil products received pursuant to the oil-backed loan agreements with State-Owned Entity #1 and State-Owned Entity #2.”
Continuation of Third-Party Payments Despite Concerns
According to the DOJ:
“By in or about January 2018, Gunvor executives and compliance personnel were aware that Gunvor had paid Antonio Pere and Enrique Pere (the culpable third parties) tens of millions of dollars pursuant to the Company’s services agreements with EIC and OIC (entities associated with the third parties), without having received other supporting documentation for EIC’s or OIC’s business activities on Gunvor’s behalf. Between in or about May 2018 and in or about May 2020, Gunvor executives and compliance personnel made requests to Antonio Pere and Enrique Pere (i) for supporting documentation to justify the commission payments and (ii) to meet with executives and compliance personnel. Antonio Pere and Enrique Pere failed repeatedly to provide complete responses to Gunvor’s documentary requests and would not travel to Gunvor’s headquarters for the requested meeting. Notwithstanding these repeated failures, Gunvor continued to make corrupt payments to entities owned and controlled by Antonio Pere and Enrique Pere until approximately January 2020, at which time Gunvor suspended payments to OIC. Gunvor terminated its services agreement with OIC in or around May 2020.”
